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Pennoni Associates, Inc.False Claims Act Investigation

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Pennoni Associates, Inc.

Pennoni Associates, Inc. (PAI) is an Pennoni Associates, Inc. (PAI) is an multi-disciplined engineering consulting multi-disciplined engineering consulting firm headquartered in Philadelphia, PA firm headquartered in Philadelphia, PA with offices throughout the Northeastwith offices throughout the Northeast

PAI contracted with the Delaware PAI contracted with the Delaware Department of Transportation (DelDOT) Department of Transportation (DelDOT) to provide bridge and overhead structures to provide bridge and overhead structures materials and testing servicesmaterials and testing services

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Introduction

This matter was referred by the Department of This matter was referred by the Department of Transportation’s Office of Inspector GeneralTransportation’s Office of Inspector General

DelDOT was substantially involved in all aspects DelDOT was substantially involved in all aspects of the investigationof the investigation

The State Attorney General’s Office was involved The State Attorney General’s Office was involved to ensure that all amounts lost, state and federal, to ensure that all amounts lost, state and federal, were recoveredwere recovered

The investigation involved 626 invoices submitted The investigation involved 626 invoices submitted from February 1998 through January 2002from February 1998 through January 2002

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The False Claims Act

Imposes liability on a defendant who:Imposes liability on a defendant who: presents a claim for paymentpresents a claim for payment the claim was false or fraudulentthe claim was false or fraudulent the defendant knew the claim was false or the defendant knew the claim was false or

fraudulent fraudulent

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PAI Submitted Claims Claim defined. – For purposes of this section,

"claim" includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.

31 U.S.C. § 3729(c).

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Agreements At Issue

The Agreements at issue were 915 and 915-1The Agreements at issue were 915 and 915-1 The invoices involved amounted to $975,760The invoices involved amounted to $975,760 The Federal participation amounted to $736,648 The Federal participation amounted to $736,648

(about 75%)(about 75%) The PAI/DelDOT agreement explicitly stated that The PAI/DelDOT agreement explicitly stated that

the contract involved participation of Federal-aid the contract involved participation of Federal-aid highway funds and was subject to applicable, State highway funds and was subject to applicable, State and Federal Laws, both criminal and civil. PAI and Federal Laws, both criminal and civil. PAI certified its understanding of this fact certified its understanding of this fact

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Thus, PAI submitted claims to DelDOT on Thus, PAI submitted claims to DelDOT on contracts in which the Federal government contracts in which the Federal government provided the majority of the moneyprovided the majority of the money

Accordingly, under the “claims” definition of the Accordingly, under the “claims” definition of the False Claims Act, PAI submitted claims False Claims Act, PAI submitted claims amounting to over $975,000amounting to over $975,000

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Many of the Claims Were False or Fraudulent

Excessive Labor Hours ChargedExcessive Labor Hours Charged Billed Travel Time As Direct TimeBilled Travel Time As Direct Time Not Allowed or Excessive Miles ChargedNot Allowed or Excessive Miles Charged Subsistence Charges Supported by Subsistence Charges Supported by

Fictitious or Missing ReceiptsFictitious or Missing Receipts Billed for Non-Subsistence ExpensesBilled for Non-Subsistence Expenses

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Billing of Excess Hours

PAI billed the Government for excess labor PAI billed the Government for excess labor hours that were not workedhours that were not worked

155 invoices155 invoices Amount at issue: $48,848.29Amount at issue: $48,848.29

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Summary of Evidence Timesheets were not supported by timed toll Timesheets were not supported by timed toll

receipts, hotel check-in and check-out times, and receipts, hotel check-in and check-out times, and timed meal receiptstimed meal receipts

Impossible day analysis/two or more inspection Impossible day analysis/two or more inspection locations on the same daylocations on the same day

Former inspector admitted that he would leave Former inspector admitted that he would leave plants early but still charged full eight hour daysplants early but still charged full eight hour days

Former inspector admitted that he altered toll and Former inspector admitted that he altered toll and other receipts to hide early departure or late arrival other receipts to hide early departure or late arrival to inspection locationsto inspection locations

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Billing Travel as Direct Time

PAI billed the Government for direct labor PAI billed the Government for direct labor

hours that were actually travel hours not hours that were actually travel hours not allowed under the agreementsallowed under the agreements

135 invoices135 invoices Amount at issue: $44,778.25Amount at issue: $44,778.25

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Summary of Evidence

Travel time coded or otherwise indicated on Travel time coded or otherwise indicated on company timesheets was included in invoiced company timesheets was included in invoiced direct hoursdirect hours

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Not Allowed or Excessive Miles Charged

PAI billed the Government for mileage PAI billed the Government for mileage

reimbursements that were not allowed reimbursements that were not allowed under the agreementsunder the agreements

189 invoices189 invoices Amount at issue: $20,242.38Amount at issue: $20,242.38

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Summary of Evidence

Mileage reimbursement not allowed for inspection Mileage reimbursement not allowed for inspection sites 50 miles or less from the inspector’s office or sites 50 miles or less from the inspector’s office or residence, whichever was lessresidence, whichever was less

Mileage reimbursement was excessive when Mileage reimbursement was excessive when claims were in excess of 10 miles more than the claims were in excess of 10 miles more than the distance between inspector’s residence or office distance between inspector’s residence or office and the inspection locationand the inspection location

No claims were submitted for less than or equal to No claims were submitted for less than or equal to the actual milesthe actual miles

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Subsistence Charges Supported by Fictitious or Missing Receipts PAI billed the Government for subsistence PAI billed the Government for subsistence

charges that were unsupported by receiptscharges that were unsupported by receipts 2 invoices2 invoices Amount at issue: $8,323.64Amount at issue: $8,323.64

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Summary of Evidence

No receipts were producedNo receipts were produced Consecutive numbered meal receipts were from Consecutive numbered meal receipts were from

the same pad but dated days/weeks apartthe same pad but dated days/weeks apart Former inspector stated that he simply made up Former inspector stated that he simply made up

receipts. Management did not care. Stated that receipts. Management did not care. Stated that other inspectors had same practice. Another other inspectors had same practice. Another former inspector admitted practice as well.former inspector admitted practice as well.

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Billed for Non-Subsistence Expenses

PAI billed the Government for non-PAI billed the Government for non-

subsistence items such as alcohol and subsistence items such as alcohol and toiletriestoiletries

1 invoice1 invoice Amount at issue: $2,580.12Amount at issue: $2,580.12

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Summary of Evidence

Itemized store receipts reflected unallowed itemsItemized store receipts reflected unallowed items

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PAI Knew the Claims Were False or Fraudulent.

For purposes of the False Claims Act, the terms "knowing" and "knowingly" encompass not only those with actual knowledge of the falsity of the claim, but also those who act: in deliberate ignorance of the truth or falsity of the information; or, in reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729.

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The Inspectors Had Actual Knowledge That Their Submissions Were False

PAI was vicariously liable for their acts.PAI was vicariously liable for their acts. United States ex rel. Thompson v.

Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997);

United States v. O'Connell, 890 F.2d 563, 568 (1st Cir. 1989);

United States ex rel. McCready v. Columbia HCA, 251 F. Supp. 2d 11, 119 (D.D.C. 2003);

United States v. Williams Building Corp., 158 F. Supp. 2d 1001, 1008 (D.S.D. 2001).

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PAI Submitted Claims Based on the Inspectors’ Information In Reckless Disregard, or Deliberate Ignorance, of the Truth or Falsity of that Information

PAI was on notice that the inspectors’ PAI was on notice that the inspectors’ information was potentially false or information was potentially false or fraudulent yet, nonetheless, submitted fraudulent yet, nonetheless, submitted claims based on this information.claims based on this information.

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Damages

We calculated that the government’s single We calculated that the government’s single damages were $124,772.68damages were $124,772.68

The False Claims Act provides for up to The False Claims Act provides for up to trebling of the amounttrebling of the amount

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Penalties For False Claims Submitted

PAI submitted at least 125 non-duplicative PAI submitted at least 125 non-duplicative invoices to the government containing false invoices to the government containing false or fraudulent claims.or fraudulent claims.

The False Claims Act provided for a $5,000 The False Claims Act provided for a $5,000 to $10,000 penalty per false claim to $10,000 penalty per false claim submitted. For violations occurring after submitted. For violations occurring after September 1999, penalties are increased.September 1999, penalties are increased.

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PAI’s Settlement

Damages: $275,000Damages: $275,000 Penalties: $75,000Penalties: $75,000 Total: $350,000Total: $350,000 14 Inspectors referred to FHWA for 14 Inspectors referred to FHWA for

suspension/debarment action.suspension/debarment action.